Introduction

Living in today’s fast-paced, interconnected world feels like a double-edged sword. On the one hand, globalisation makes life seamless, and your morning tea, cooking oil, or petrol comes halfway across the world. On the other hand, it also means when something goes wrong out there, a war, a trade dispute, or a drought, it hits you right where it hurts: your expenses. These ripple effects often appear in commodity prices, especially for essentials like oil, gold, and food grains.

Let’s examine how geopolitics and natural disasters shake up these prices and why they matter to everyone.

Geopolitics: When Humans Make Their Mess

International trade functions like a smoothly running machine; however, when politics comes in, it throws a wrench into the engine. Take the example of the Russia-Ukraine war in early 2022. It not only localised the country, but it also damaged global oil and wheat supply chains. Oil prices increased, pushing petrol and diesel prices in India up. Wheat prices increased, contributing to the overall price increases of wheat-based products, from bread to biscuits. Then, there is OPEC, the oil cartel that determines the crude oil output from member countries. In 2022, when OPEC decided to cut oil production, it cascaded down into crude oil prices, which made their way back into fuel prices in India. Then comes the world of sanctions and export bans. For example, when Indonesia announced a temporary ban on palm oil exports in 2022, edible oil prices went skyrocketing in India. Global prices rose after India decided to ban wheat exports to control prices domestically. These are potentially good initiatives to protect domestic supply but are still difficult for global markets (and prices).

Let’s not forget gold, a commodity Indians love. During geopolitical crises or market uncertainty, global investors rush to gold as a “safe haven,” increasing its price. For Indian consumers, that means more expensive jewellery or coins during turmoil.

Natural Disasters: When Mother Nature Makes a Stand

If geopolitics is regarded as the lifestyle of humankind, natural disasters have a way of acting out nature's storyline. In India, irregularities in the monsoon directly impact food productivity. A late or failed monsoon can reduce yields of onion, pulses, or tomatoes and increase prices. In 2023, erratic rains led to a fall in onion yields, dramatically increasing prices. Weather disasters disrupt globally traded commodity prices, too. In Brazil, a drought in 2024 reduced coffee bean availability and, in turn, raised prices everywhere, even in your local cafe. Toward home, droughts in Maharashtra or floods in Punjab would reduce the available supply of pulses and wheat, resulting in food inflation.

Climate events, such as El Niño, impact food inflation as well. In India, years with El Niño weather systems typically follow global patterns of below-normal rainfall. This impacts rice and sugarcane production prices, the primary agricultural commodities impacting all food pricing.

The Food Inflation Connection

Food inflation matters in India, often more than most all forms of inflation by and for household budgets. There are a few food commodities that move the market in Indian food inflation:

• Onions - Due to weather and storage, they have unpredictable pricing.

• Pulses (tur and moong dal) - rainfall and imports dictate the seasonal production available in India.

• Tomatoes – Short shelf-life and seasonal swings make prices unstable.

• Wheat and Rice – Any disruption here affects the nation’s staple food supply.

When natural disasters hit producing regions or when global political decisions impact exports and imports, these items are the first to go.

Real-Life Hits: Connecting the Dots

Major Events That Shook Commodity Prices

Each time, the dominoes fall: less supply, higher demand, bigger bills.

So, What Can You Do?

You can’t prevent wars or change the weather. But you can understand the patterns. For example, during uncertain times, gold holds value better than most commodities, one reason it’s still a favourite investment in Indian households.

For those investing in commodities directly or through mutual funds, keeping tabs on global events, monsoon predictions, and policy changes can help you make more informed decisions.

The Bottom Line

Commodity prices don’t exist in a vacuum. A policy decision in the Middle East or a flood in India’s grain belt can send prices spiraling, and you feel it whether you're refueling your car, buying vegetables, or shopping for gold. The more you understand how geopolitics and natural forces affect commodity markets, the better you can prepare, whether investing, budgeting, or just trying to understand why prices keep going up.

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